Indonesia's currency 'Rupiah' strengthens against US dollar

The rupiah strengthened against the US dollar in the Jakarta interbank spot market here on Monday morning as investors hunted the local unit.

The Indonesian currency traded Rp9,405-Rp9,415 per US dollar, up 35 points from Rp9,440-Rp9,455 per US dollar at the market`s close at the end of last week.

The rupiah gained as foreign investors were active in the domestic market, according to Rully Nova, a foreign exchange analyst of PT Bank Himpunan Saudara Tbk.

However, foreign investors were still worried about the ongoing rivalry between the National Police and the Corruption Eradication Commission (KPK) which was not showing signs of resolution, prolong, he said.

Foreign investors were closely following developments in a number of high-profile cases happening in Indonesia, especially the Bank Century bail out case, he said.

Problematic Bank Century has changed its name into Bank Mutiara after the government injected it with Rp6.7 trillion in fresh funds.

The market was still positive because basically Indonesia`s macro economic fundamentals were quite sound, and the country`s foreign exchange reserves had increased, he said.

Meanwhile, Krisna Dwi Setiawan, a domestic money market observer of PT Valbury Asia Securities, said the current position of the local currency was quite sound but it would be hard for the rupiah to reach the level of Rp9,200 per US dollar.

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Source: | Antara |

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Indonesia economic growth will reach 6 percent in 2011

State Minister of National Development Planning/Head of the National Development Planning Agency (Bappenas) Armida S Alisjahbana said in 2011 the government will step up economic growth to six percent.

She made the statement at a meeting between the media and Bappenas in Bogor Friday.He said that the acceleration in 2011 was made as the world economy may have been restored to normal, increasing exports and investments.

In the meantime, most economic obstacles may have been overcome in 2010, meeting the initial targets of the new government, so that in 2010 economic growth may at least reached 5.5 percent.

He said that under these circumstances, acceleration is possible, so that in 2014 economic growth is expected to reach at least seven percent.

He also said that the acceleration can be successful if no external shock had occurred, such as the price of oil increasing up to 160 US dollars per barrel, or a financial shock like what happened in 2008.

In the meantime, to stabilize the economy, Armida said she will focus on a synergy of national development, as well as intensifying synergy between the different regions and thereby boosting domestic connectivity.

She also said that in December 2009 she will hold a consultative meeting on national development planning for a national middle-term development plan.

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Source: | Antara |

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Europe witnesses its biggest market share drop

European shares sharply fell on Friday, with a key index recording its biggest monthly decline in eight months, as financial stocks lost heavily on mixed U.S. economic data a day after better-than-expected GDP numbers.

The pan-European FTSEurofirst 300 .FTEU3 index of top shares provisionally closed down 2.3 percent at 974.45 points.

The index, which is up more than 51 percent from its lifetime low in early March, fell 2.3 percent in October. The index had gained in the previous three months.

"I think today a lot of people are settling up positions for the end of the month. A lot of people are using yesterday's gains as an opportunity to close out profits at a higher level," said Joshua Raymond, market strategist at City Index.

The market was knocked after U.S. consumer sentiment slipped this month, though business activity in the U.S. Midwest expanded in October to the highest level since September 2008.

Banks retreated from earlier gains and took the most points off the index. Banco Santander (SAN.MC), BNP Paribas (BNPP.PA) and Deutsche Bank (DBKGn.DE) were down 3.4 to 4.5 percent.

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(Reporting by Joanne Frearson, editing by Atul Prakash for REUTERS) 

Picture source: Reuters

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A Threat to Global Recovery: Too Many Factories

By Michael Schuman of Time Magazine


The half-decade before the financial crisis was a go-go time for the global economy. Consumption reached unprecedented heights; so did oil prices and shipping rates. And that frantic buying and selling was a boon for manufacturing. As U.S. consumers flexed their credit cards for flat-panel TVs and video games, factories sprouted around the world to make all the stuff that was crammed into consumers' SUVs. But amid the recession, spending has shrunk dramatically, as debt-laden U.S. consumers are learning to save — and those factories have a lot less to do. During the downturn, the rates at which industrial capacity was being utilized in the U.S. and Japan, the world's two largest economies, plummeted to the lowest levels on record. In China, the world's workshop, tens of thousands of factories making mostly low-end merchandise have shut down.


A slowdown on the world's assembly lines is a normal part of any recession. As demand shrinks, so must production. But now that the recession is easing, there is considerable debate among economists about whether manufacturers will be rehiring workers and restarting assembly lines anytime soon. Despite aggressive downsizing by industries like auto manufacturing over the past 18 months, there are fears that the world remains stuck with so much excess production capacity that any recovery will be anemic, plagued by deflationary pressures, high unemployment and ailing bank-loan portfolios. "Unless we deal with the excess capacity situation, we will have a protracted crisis that will continue to wreak havoc on all countries," warned World Bank chief economist Justin Lin in a July speech.



There's evidence that this dire scenario is uncomfortably possible. Although China's economy is growing relatively strongly, the government is so concerned about excess capacity that it recently banned investments in aluminum production and imposed stiffer conditions on new projects in the steel, coal and petrochemical sectors. Without such controls, "it will be hard to prevent vicious market competition and increase economic benefits, and this could result in facility closures, layoffs and increases in banks' bad assets," a government statement said.

The rest of the industrialized world may be in worse shape. To measure excess capacity, economists use a metric called the "output gap," defined as the difference between the potential output of a given economy and what is actually being produced (including services). The Organization for Economic Cooperation and Development (OECD) is projecting that, despite global production cutbacks, the situation is actually getting worse because the recovery will be weak. In 2010 the output gap among 24 OECD member nations is projected to widen to -5.7% — the widest gulf by far in the post–World War II era. 


Minding the gap isn't merely an academic exercise. Excess capacity directly affects the biggest question facing policymakers today: when to exit from stimulus programs that were introduced to combat the recession. Everyone agrees the cure for excess capacity is increasing demand, whether it is generated through a fundamentally strengthening economy or through artificial means like "Cash for Clunkers" measures. Turn off the tap too quickly before normal demand recovers, and the downturn could persist. "The best way of reducing excess capacity is by not prematurely unwinding stimulus spending," Lin of the World Bank told TIME.

But what if this recession isn't an ordinary recession? There is a widespread belief among economists that a secular shift in global spending patterns is under way. U.S. consumers, the usual drivers of economic growth, are reducing their outlays and may do so for years to come as they pay down debt. Under this "new normal" scenario, some of today's spare capacity may never come back into action because total demand will remain depressed indefinitely. Factories in some crowded sectors will have to be permanently closed or retooled to make different products.

Retooling is not impossible. Germany's Volkswagen is converting part of a car-engine plant to produce "green" electrical generators. And if you buy into the great Asian growth story, then there is a chance that spending by wealthier consumers in countries like China and India can offset at least some of the decreased demand in the West. HSBC economist Frederic Neumann said in a September report that some Asian manufacturers have gained back the power to raise prices, implying that the impact of excess capacity in the region might not be as severe as some fear. "What was so scary about the recession were the unprecedented output gaps that conjured up images of endless industrial slack and competition so fierce that no one could ever hope to raise their prices again," Neumann wrote. "What's happened now, however, is almost as stunning ... pricing power is starting to return far earlier than anyone dared to predict."

Others are not so sanguine. HSBC's China economist, Qu Hongbin, worries that his country is full of manufacturers trying to hang on while waiting for overseas demand to recover. "There still is hope that we'll go back to the old days," Qu says. But "demand in the future will be lower than in the past," he says. "That means the factory owners have to face reality" — the reality of them no longer cranking out ever more widgets in a widget-weary world.


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